Monday, 21 September 2015

When things get really ugly, and no one can agree about anything when it comes to property settlement matters, sometimes the court is called upon to appoint trustees for sale of property. Who in turn is appointed can at times in itself be a vexed question.

This very issue was seen in a fight between three brothers, the Chows, who were arguing over their late mother's estate. The way that the problems were addressed in the NSW Supreme Court in Chow v Chow (No 1) [2015] NSWSC 1347 contain pearls of wisdom. The judgment is not a long one, so I have included the whole judgment:

The
present proceedings involve a dispute in relatively small compass that
has arisen amongst three brothers, who are the sons of the late Grace
Chow who died on 1 December 2002. Probate of her will was granted to the
three brothers on 27 September 2004 together with the third defendant
who has filed a submitting appearance. The estate of Grace Chow is now
fully administered. There remains in the estate a property at Darling
Point. There are also in the estate three other parcels of real estate
which are now co-owned by the three brothers, which I will refer to as
Wentworth Avenue, a property containing two units, a Yeo Street property
containing eight units and a Mosman property containing two units.
Thus, there are four parcels of real estate which are involved in this
current dispute. There is also a parcel of jewellery owned by the late
Grace Chow. That parcel of jewellery has a value of approximately half a
million dollars. Of that half a million dollars, one item is estimated
as having a value of or at least a maximum value of about $350,000 and
another $120,000, and there is somewhere between $30,000 and $100,000
worth of what I can irreverently call bits and pieces.

The brothers are, to a great degree, agreed that all four parcels of
real estate and the jewellery should be sold and a distribution should
be made. However, there are four matters on which there is dispute and
which I have to resolve. These are: (a) whilst it is agreed that orders
should be made under Section 66G of the Conveyancing Act 1919
in respect of the four parcels of real estate, there is no agreement as
to who should be the trustees, and the plaintiff and the first
defendant on the one hand and the second defendant on the other hand
have put forward counter proposals.

Item (A) for decision is as to who should be the trustees to be
appointed under Section 66G; item (B) is how should the jewellery be
sold; item (C) is how should the costs of the present application be
borne; and item (D) is what is the appropriate form of the orders. I
will not deal with (C) until I have given my decision on (A) and (B),
which will happen shortly. Then I will hear submissions on (C) and
decide the point, then stand the matter over for short minutes to be
brought in in due course because the orders may be very complicated. I
will deal with (D) at a later date.

Item (A)

I then pass to (A). The two sets of possible trustees are as
follows, as put up by the first defendant and accepted by the plaintiff,
are Mr Martin and Mr Anderson. Mr Martin is described in the evidence
as an experienced property professional having worked for more than
40 years in the property industry, for 23 years he was in senior
positions with a leading firm of estate agents. He has a non-executive
board position with two companies in the industry and had been involved
in senior roles.

Mr Anderson has also been in the industry for a long time. He is a
CPA of 40 years standing. He has been a member of various boards, and he
has been in senior executive roles with estate agents and persons
involved in the property industry for very many years.

The opposing people put up by the second defendant are two company
liquidators, Mr Olde and Mr Landrey. They are partners and they are
experienced official liquidators. The second defendant put up
alternatively two other official liquidators, but that is very much a
reserve panel.

I have no doubt that whichever team I appoint would carry out a
competent and professional job. I suggested at one stage that perhaps
one person from each team might be appropriate, although I could see
that would lead to extra costs for consultation; but as that suggestion
was not taken up by anybody, I will put it to one side.

When deciding upon trustees for sale, where there is no
consent, four factors usually need to be considered by the Court. These
are in no particular order of importance; (1) the principle that the
Court tends to prefer the preference of a person with the greater
interest in the land ... (2) the trustees should be independent and as
free from conflict of interests as possible ... (3) the trustees,
particularly where they have more active duties than merely to sell a
piece of real estate, should have the appropriate skill, expertise and
experience; and (4) the Court should endeavour to get the best value for
the parties' money and see that as between two equally alternative
proposals the cheaper is preferred.

At the commencement of the hearing I put to all counsel that I
assumed that those principles were the relevant ones to consider in this
dispute and no one denied this, thus accordingly I apply them.

So far as the first factor is concerned, we have a situation where
the plaintiff and the first defendant hold two-thirds of the beneficial
interest in the property and the second defendant one-third.
Accordingly, on the larger interest factor, the plaintiff and the first
defendant get a plus for Messrs Martin and Anderson. Factor 2 is that
the trustee should be independent. That seems equally the case with both
proposals. Factor 3 the appropriate skill, expertise and experience;
that again appears to be relatively equal. I slightly prefer the
plaintiff. The task is something like comparing apples and oranges
because the second defendant's team as official liquidators would be
used to selling all sorts of property the plaintiff and first defendant
team are more skilled in the selling and dealing with real property. The
reason why I slightly prefer the plaintiff is that one of the second
defendant's nominees, Mr Langrey, is currently seconded to do some work
in Denver Colorado. Although Mr Olde says that in any event when two
people are appointed one has the lead and the other has the support
role, and this would still be possible even though Mr Langrey is in
Denver. It seems to me that is not the most desirable state of affairs.

There are a whole series of cases and in the textbooks and Dalrymple v Melville
(1932) 32 SR (NSW) 596 is one where a trustee has got into problems
because there are two trustees and one leaves it to the other who does
not deal with the matter appropriately. With two professional persons
like Mr Olde and Mr Langrey, both of whom cannot be passed by the
appropriate authorities as official liquidators, that is only a small
problem. Nonetheless, when one is looking at very small margins over the
two contenders, I slightly favour the plaintiff.

Factor 4 focuses on costs. There are different methods proposed by
the rival contenders as to the method of charging. The plaintiff and the
first defendant's team say they will charge 0.85 per cent on the sale
of properties within the brotherhood and 1 per cent outside that. On the
other hand, the liquidators intend to charge their normal charge out
rates which involve $625 an hour for the managing directors and
corresponding lesser sums for persons lower down the pecking order.
However, they would cap their fees at not more than what Messrs Martin
and Anderson would charge.

Mr Walton SC, who appears for the second defendant with Mr Sneddon,
says this would mean marginally there could be a slight saving in costs
with the Olde/Langrey team as opposed to the Martin/Anderson team. I
think that is just possible, but the chances of it happening are
relatively slim. Accordingly, when I add up the four factors, it seems
to me that the plaintiff and first defendant's team is, if I can use the
expression, ahead on points. Accordingly, I favour appointing them.

Item (B)

The next question is what is to happen to the jewellery. The
suggestion of Mr Blackburn-Hart SC, who appears with Ms Tucker for the
plaintiff, is that it be left to the trustees to decide the method of
sale. Normally, I would have a lot of sympathy with that proposal
because it is far better for these things to be worked out at the coal
face rather than judges to work it out in advance in theory. However,
these brothers have a tendency to resort to litigation and to postpone
the question seems to me not to perform my duty under s 56 of the
Statute.

It seems to me however, that I can to some extent get the best of
both worlds, that is both leave it to the trustee and also give the
trustee some advice in advance. The advice is that, unless the trustees
consider that there are factors at the time when they make their
decision to sell which outweigh what I am about to say, it would be
appropriate to put in play what the first defendant suggests is the
appropriate method of sale, that is in accordance with page 278 of the
court book, that the two special items of jewellery which are referred
to in evidence as parcel A and parcel B be again valued by an
independent valuer. That valuation not be disclosed but the
beneficiaries may then bid on parcel A and parcel B and the trustees
would be justified in selling to the highest bidder, assuming there is a
bidder, otherwise to sell at auction.

Then the remainder of the jewellery should be put into three parcels
C, D and E, the contents to be approximately equal in value, the
contents of each parcel to be specified and again the brothers may bid
for each parcel. The highest bid for any particular parcel is to be
accepted.

However, it should be noted that Section 66G only applies to the
real estate so that the appropriate order when the short minutes are
drawn up should recognise it is under Section 36A of the Conveyancing Act and the appropriate adjustments be made. I believe what I have just said deals with the matters of principle.

As I said, I will leave Item (C) to be dealt with for now. When the
orders are drawn up, care must be taken to make sure that under
Sections 66H and 66I of the Conveyancing Act
sufficient details are given as to consultation and as to the procedure
to be adopted where one of the brothers is the successful bidder for any
particular piece of property so far as that brother's interest, being
set off against the purchase price.

No comments:

"To Stephen,
Thank you for all your support on this special day. Bringing about awareness about Domestic Violence is so very important. Thank you for your choice to stand up against it.
Blessings,
Narelle".
Narelle Warcon, author of Blonde Roots

I am one of Australia's leading surrogacy and divorce lawyers. I was admitted in 1987, and have been an accredited family law specialist since 1996.
I am a partner of Harrington Family Lawyers, Brisbane.
I am an international representative on the American Bar Association's Artificial Reproductive Technology Committee. I am the first international Fellow of the American Academy of Assisted Reproductive Treatment Attorneys. I am one of 33 Australian practising lawyers who are Fellows of the International Academy of Family Lawyers, one of the most prestigious family law groups in the world. I am a founding member of the Australian Chapter of the Association of Family and Conciliation Courts.
I have written and spoken extensively about family law, domestic violence and surrogacy.
I have handled pretty well every type of family law case there is known in over 30 years, and have advised surrogacy/fertility clients from throughout Australia and at last count 24 countries overseas. I have obtained surrogacy orders in Qld, NSW, Vic and SA- the only lawyer to have done so.